Buy The Consumer?

On Tuesday, retail shares surged higher after reports suggested that Gustav didn’t cause any major damage in the Gulf. With back-to-school season at hand, investors were clearly betting on lower gas prices and, as a result, an increased willingness to spend.

On Thursday, retailers overall are expected to report a 2 percent increase in same-stores sales for August with discounters like Wal-Mart and warehouse club operators such as Costco expected to keep faring much better than the slumping apparel-based stores, according to the International Council of Shopping Centers-UBS index.

However, in a bid to pull hesitant shoppers into their stores, retailers are slashing prices on everything from jeans to dinnerware. And those fat discounts could come at a big cost for the companies.

There's a fine line between aggressive promotions and panic, and we are seeing a little bit of both right now," said Dan Hess, founder and CEO of research firm Merchant Forecast.

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Should you buy the consumer?

Expectations for some retailers are so low that they present interesting risk / rewards, explains Karen Finerman. I like J. Crew for that reason, she says.

I’d look at Sears, adds Jeff Macke. The news simply can’t get worse them. And I’m long Wal-Mart.

The Gap and Urban Outfitters both seem to be running their businesses better, adds Guy Adami. Margins are up and inventories are down. I think both a buys on any dip.

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Trader disclosure: On Aug 28, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WMT), (MSFT), (UUP); Macke Is Short (TM); Najarian Owns (ETFC); Najarian Owns (LEH) Put Spread, (LMT) Put Spread; Najarian Owns (SCHW) Call Spread, (LEH) Call Spread; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (AAPL) And An (AAPL) Collar; Najarian Owns (XLF) And An (XLF) Collar; Adami Owns (C), (GS), (INTC), (AGU), (MSFT), (NUE), (BTU); Finerman Owns (GS); Finerman's Firm And Finerman Own (KALU); Finerman's Firm Owns (MSFT), (SUN), (VLO), (TSO); Finerman's Firm Is Short (BA); Finerman's Firm Owns (AAPL) Calls, (JCG) Calls; Finerman's Firm And Finerman Own (C) Leaps; Finerman's Firm Is Short (IYR), (IJR), (SPY), (IWM), (MDY)

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